well done cba, page-7

Thanks for the kind words Pegasus.

Well on the plus side:

- I thought there was a greater than 50% chance that CCU would not emerge from the trading suspension, so good to see they have finally gotten around to the capital raise.

- If they were able to raise the $8m, (and based on assumptions below regarding POS and production levels) this should deal with their debt obligations for 2014.

- We all know that at 200koz / month and a silver price over AU$24, CCU is worth north of 20cps, so the SPP should give it a good 6-8 months to get to this consistent production rate and (hopefully) a strong POS.


On the negative side:

- I don't understand how they can raise $8m via the planned SPP. At a SP of 8.5c, the SPP issue price is 6.8c and over 117m shares would need to be issued. This is 35% of the issued capital, so I'm not sure whether this is possible under "ASX Listing Rules"

- Further complicating the $8m target is that Magna is restricted to applying for just $15,000 worth of shares. I'm not sure that there are enough retail shareholders who are (a) interested in risking further money on CCU and (b) able to afford the $15K.

- Further, further complicating the SPP is Patersons. I note that they haven't agreed to underwrite yet, and if / when they do, the terms may be pretty ugly to existing shareholders.

- Whether the SPP is underwritten or not is clearly a material term, so CCU is not leaving much time between sorting out this issue and the SPP closing date (I certainly wouldn't participate in the SPP until this issue was clarified).

- I don't believe in the "nameplate capacity by March and onwards". 99koz for January is a joke, and Feb sounds like being similar. As I've written before, it was amateurism in the extreme for management to rave about 2 weeks of production and then serve up what will be a good 2.5 months of underproduction. I'm only confident enough to assume a maximum of 500koz/qtr for the balance of 2014, but note that a run in the POS could make up for this.

- I've lost a heap of confidence in management. They compounded the amateurism of the December production announcement by delaying the capital raise. They would have been able to get the capital raise away at around 10c, and had a high subscription rate (as it would have been completed while everyone thought they could produce at 250koz / month. Now they'll be doing it after running into a thrice-extended debt deadline, at sub-7c /share, and coming off two very poor production months. Unbelievable.


I wouldn't like to be in the position of a shareholder ...

If you don't take up your $15K, the company will not be able to make the $2.6m CBA payment and the $3m Magna payment, both due by end-June, and will be back in the situation its been in for the past 6 months.

If you do, and any of:
- poor SPP take up;
- failure to reach and maintain nameplate production;
- POS flat-lining or decreasing,

happen, you may be kicking yourself that you "threw good money after bad".

GLTA.